Greek Prime Minister George Papandreou speaks in calm, measured tones, but he is clearly determined to do what it takes to pull the debt-crushed remnants of his country’s economy out of the fire. This week he is in Washington campaigning for a unified front against the “unprincipled” financial speculators who are betting that his crisis-hit country will default on its loans. At the Brookings Institution on Monday, he called for joint a U.S.-EU “initiative in dealing with speculators.”
His government has introduced draconian reforms, but progress was being undermined, he said, by “the global power of poorly regulated markets . . . Traders and unprincipled speculators have forced interest rates on Greek bonds to record heights.”
To this nit-picking reporter, however, Papandreou’s account of how Greece got into this mess and how it plans to get out of it raised a couple of nagging questions. In October, Papandreou’s socialists trounced the ruling conservatives to take over the government. The new administration, says Papandreou, then made the nasty discovery that the Greek budget deficit was double what the outgoing administration had declared — and what had been a bad economic situation promptly became an urgent financial crisis.
The fact that the incoming government had to be told this by the outgoing one doesn’t say much for the Socialists’ vigilance while in opposition. Would the Republicans fail to notice if the Obama administration’s budget deficit were not really $438 billion, which they say it is, but secretly more like $876 billion? Papandreou’s explanation is that the conservative government and its trading agents were indulging “in all kinds of practices that were too opaque for us to see and prevent.”
Secondly, in saying firmly that Greece was not asking for a bailout but would do its borrowing from the banks, Papandreou seemed to making a virtue out of necessity. In visits to Berlin and Paris, he garnered praise for his tough austerity program, but no talk of a bailout. Chancellor Angela Merkel, for one, knows better than to go against German public opinion, which is strongly against any financial support for the Greeks. And the IMF, in this situation the institution of last resort for Papandreou’s government, is clearly skeptical of being able to help Greece on the scale required to stave off collapse. Greece raised $7 billion last week, but needs another $90 billion before the end of this year.
Thirdly, if Papandreou brought any concrete plan to Washington for combating Wall Street piracy, he did not reveal it at Brookings, where the not-so-veiled sub-text of his speech was a warning to Greece’s European partners that they should consider helping Athens as insurance against being caught in the backwash should the worst befall his country. Or, to put it more crudely, if Papandreou goes down, he’s taking everyone else with him. Greece’s financial crisis, the prime minister cautioned, “is a challenge to our democratic institutions.”